"All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation," said Ron Phipps, president of NAR, in a written statement.

Compared to a year ago, the rate of home sales has surged 18.6% from a lethargic 4.24 million homes. Sales have picked up as home prices have fallen. The median price for an existing home was $168,300 in August, down 5.1% from a year ago.

But home buyers are still struggling against a very tight credit market, as banks have pulled back on lending.

"The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price," said Phipps. He recommended that community banks and small regional banks might be the best option for a prospective home owners.

Rising costs of renting are also drawing Americans into the home buying market, said Lawrence Yun, NAR chief economist, in a written statement.

And still other buyers walked back into the housing market in August to protect their assets from market volatility. "Investors were more active in absorbing foreclosed properties," said Yun. "In addition to bargain hunting, some investors are in the market to hedge against higher inflation."

Ian Shepherdson, Chief U.S. Economist at High Frequency Economics said in a research note that the rise in home sales in August is attributed to pent-up demand and says it's nothing to be celebrated.

"This is all welcome, but it should not be mistaken for evidence that a real recovery is beginning," he said.